EOH shows signs of recovery, here’s where the company sees growth opportunities

South African technology company EOH has reported a significant improvement in its financial performance, with total headline loss per share narrowing by 72 percent for the year ended July. The company has made strides in reducing its gross debt by 20 percent year-on-year, positioning itself for growth and expansion opportunities. In a recent interview with CNBC Africa, Megan Pydigadu, the Chief Financial Officer of EOH, addressed key issues impacting the company's financial outlook and highlighted areas of potential growth. Pydigadu emphasized the company's constructive discussions with lenders to refinance its debt, noting that while there may be material uncertainty regarding the company's ability to continue as a going concern if refinancing is not concluded, EOH is confident in the progress made with lenders. The company has significantly reduced its debt over the past two years and is actively working on dereliveraging through the sale of assets. Pydigadu acknowledged that negotiations with lenders have faced challenges due to the impact of COVID-19 but expressed optimism about reaching favorable agreements. Regarding legacy issues, Pydigadu provided updates on problematic government contracts, stating that out of eight legacy contracts, three remain unresolved. EOH has provisions in place for these contracts and anticipates potential cash outflows of around 25 million rants in the next year. The company is focused on resolving these legacy issues and shifting its attention towards business growth in the public sector. Pydigadu also addressed the company's workforce, highlighting a reduction in headcount primarily due to the sale of businesses and non-renewal of contractor contracts. She emphasized EOH's commitment to supporting employees, citing a collective salary cut during the lockdown period as a demonstration of the company's values. In terms of future growth, Pydigadu outlined EOH's strategy to capitalize on digital transformation opportunities through its EOH2.0 business segment. With a focus on automation, app development, cloud services, and expansion into new markets like Egypt, EOH aims to leverage its capabilities for sustained growth. The company is also looking to enhance its existing offerings, such as digital signature solutions and low-code platforms, to tap into emerging market demands. When discussing the split between government and private sector business, Pydigadu indicated that historically, 20 percent of EOH's revenue has come from the public sector. With the South African government's focus on the Fourth Industrial Revolution agenda, there are significant growth prospects for EOH in serving government initiatives and driving innovation. Overall, EOH is optimistic about its future growth trajectory and remains committed to delivering value to its clients and stakeholders. The company's focus on financial recovery and growth opportunities is a positive sign for investors and industry analysts, signaling EOH's resilience and adaptability in a challenging business environment. As EOH continues to navigate its refinancing efforts and legacy challenges, its strategic investments in digital transformation and market expansion present promising avenues for sustainable growth and value creation. With a clear vision for the future and a commitment to innovation, EOH is well-positioned to capitalize on emerging trends and drive business success.